Air France-KLM plans “Boost” subsidiary

Air France –KLM group has announced plans for a new company to sit alongside its existing legacy carriers, with the aim of responding to the threat posed by the major Gulf carriers.

The new subsidiary has the working name of “Boost”, and will focus on “ultra-competitive markets”, with the aim of “opening new routes, re-opening routes closed due to their lack of profitability and maintaining routes under threat”.

The group says that the new company will be “competitive and innovative”, and will drive growth at its Paris CDG hub, in response “to the Gulf State airlines which are developing at low production costs on key markets where Air France-KLM is pursuing its growth ambition”.

The aim will be to regain market share with “a simple, modern and innovative offer, whose positioning will not be low cost”.

Air France-KLM says that the new offering will “offer its customers business and leisure destinations with standards comparable to those of Air France in terms of product quality and the professionalism of the crews”.

Details released by the group include the following:

The new company will also serve as a laboratory for the Group’s innovative ability in terms of products, digital and technology, catering, cabin design, services and the customer experience, as well as for working methods

It will number ten long-haul aircraft by 2020 with some 30 per cent of operations focused on newly-created routes

It will operate with Air France pilots on a volunteer basis at work conditions adapted to its competitive positioning

For cabin crews, an independent career path will be created to enable this new company to be operated at the level of market costs

The ground operations, handled by Air France, will also be optimized by benefiting to the maximum from digitalization

The HR framework for this new company will be negotiated with the unions in the coming weeks

The plans were revealed as part of a new Trust Together project unveiled by Jean-Marc Janaillac, Chairman and Chief Executive Officer of Air France-KLM.

“With Trust Together, Air France-KLM regains the offensive with a project which is both ambitious and realistic. It will enable us to capture our share of air transport industry growth by improving the competitiveness of our businesses.

“With our nine strategic priorities, we shall be fighting back on every front. Our strength lies in the fact that we are challengers. The status quo is not an option. We must launch a new dynamic to return to a leadership position in our markets.”

Among these priorities include regaining the offensive in the long-haul sector, with the group targeting profitable growth for long-haul operations of between 2 and 3 per cent per year through to 2020.

The group aims to achieve this through the development of the new company detailed above, as well as through deepened alliances and commercial integration with partners.

At European level, “to establish equitable competition with the Gulf State and low-cost carriers”

At French level, “to reduce the structural lag in competitiveness due to higher taxes and fees”

There are also plans to reinforce the group’s hub at Amsterdam Schiphol, through closer coordination between low-cost subsidiary Transavia and KLM, “particularly in terms of investment in the fleet and the development of the network and new joint commercial approaches”.

Air France-KLM will aim to use Transavia to compete with the TGV rail service and low-cost carriers within France, as well as to develop its European routes departing from Paris Orly and the provinces.

As part of an initiative designed to move upmarket for products and services, new uniforms are planned for the Air France and Hop! Air France by 2018-19.

The group aims to reach revenues of around €28 billion by 2020, with 100 million passengers carried and a fleet of 435 aircraft (excluding regional fleets).